What is this?

It’s been months since a big foreign bank has warned about massive overvaluations in the housing market, or another observer has blasted the sizable gulf that’s opened up between Canadian home prices and incomes.

But that doesn’t mean anxieties of a bubble have gone away. In fact, a report published Tuesday shows many within one influential group who are “concerned that an unsustainable real estate bubble is inflating.”

Who still harbours such notions? Not U.S. investment banks, or European economists.

More specifically, the concern is held by a majority of recently polled risk managers who work for Canadian lenders, such as the big banks and other institutions that have provided the $1.23 trillion in home loans now outstanding – up 5.0 year-on-year in May, according to RBC.

A survey of risk professionals across Canada’s lenders found 68 per cent said they were “concerned” when asked if about the possibility of a property bubble forming in the housing market (32 per cent replied “not concerned”).

In contrast, only 48 per cent of U.S. respondents held that view about the U.S. residential real estate market.

“There’s obviously some concern from the different risk managers from the different organizations” in Canada, said Kevin Deveau, managing director for FICO Canada, an analytics company.

FICO produced the survey on behalf of PRMIA, a worldwide trade group of risk professionals. It was the first time FICO asked the bubble question in its quarterly report.

Still, delinquencies on home loans are sitting at near historical lows, according to mortgage debt monitors like the Canada Mortgage and Housing Corp.

Historically low interest rates have made carrying costs on loans less onerous than they would be at higher interest rates, experts note.

From stable to negative

The FICO survey was published the same day Moody’s, a ratings agency that assesses risks posed to companies including those in Canada’s financial system, cut its outlook for the domestic financial sector to “negative” from “stable.”

That gloomy revision stems from Moody’s new view that Ottawa wouldn’t be so quick to act to bail out Canadian banks and credit unions should there be crisis such a housing crash.

Moody’s annual review of Canada’s banking sector focused on the seven largest lenders: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada and Desjardins, Canada’s largest association of credit unions.

Despite the downward revision, Moody’s said it holds the possibility of a severe shock to Canada’s financial system to be “extremely remote.”